Article 1: Arbitrary and opaque
Why in news: The Employees’ Provident Fund Organisation approved EPS 2026 without prior consultation, raising transparency concerns. The scheme removes higher pension options and keeps outdated limits, prioritising fiscal burden reduction over stronger pension security for workers and retirees.
Key Details
- The Employees’ Provident Fund Organisation (EPFO) approved Employees’ Pension Scheme (EPS) 2026 on March 2, replacing EPS 1995, affecting about 5.4 crore members and 82 lakh pensioners.
- The scheme was approved without prior consultation or public indication, raising transparency concerns, even though it is linked to the Code on Social Security, 2020.
- Over the past decade, changes to EPS 1995—such as the ₹15,000 wage ceiling, 60-month salary averaging for pension calculation, and restrictions on higher pension options—have reduced pension benefits and led to litigation, including cases in the Supreme Court of India.
- The new EPS 2026 removes the higher pension option and does not revise the ₹15,000 wage ceiling or the ₹1,000 minimum pension, both unchanged for over 11 years.
- Critics argue the EPFO’s approach focuses on reducing pension liabilities, whereas greater government support and higher contributions could help strengthen pension security for workers and retirees.
Approval of Employees’ Pension Scheme (EPS) 2026
- The Employees’ Provident Fund Organisation (EPFO)’s Central Board of Trustees (CBT) approved the Employees’ Pension Scheme (EPS) 2026 on March 2, replacing the EPS 1995 scheme.
- The manner of approval has raised serious transparency concerns.
- The decision impacts about 5.4 crore contributing members and 82 lakh pensioners.
Lack of Transparency and Consultation
- The EPS, EPF, and Employees’ Deposit-Linked Insurance Schemes were intended to align with the Code on Social Security, 2020.
- The Code was suddenly notified in November 2025 along with three other labour codes.
- Before the approval of the new pension scheme:
- No prior indication was given by the government or the Labour Ministry.
- Stakeholders were not consulted during the process.
Long History of Litigation
- The EPS 1995 has been one of the most litigated social security schemes in India.
- Over the past decade, it frequently appeared in court cases, including those before the Supreme Court of India.
- Many disputes arose due to changes made to the scheme’s provisions.
Key Changes to EPS Over the Last Decade
Restriction of Coverage
- Pension coverage was limited to employees earning up to ₹15,000 per month.
- This departed from the scheme’s original intention of universal coverage.
Change in Pensionable Salary Calculation
- Pensionable salary calculation shifted from the average salary of the last 12 months to the average of the last 60 months.
- This significantly reduced the pension amount employees could receive.
Restrictions on Higher Pension Option
- The option to receive higher pension based on actual salary was limited.
- Only employees who exercised the option within one year of the modified scheme (September 1, 2014) were eligible.
Supreme Court Intervention (2022)
- In 2022, the Supreme Court of India allowed the higher pension option to be extended to post-2014 retirees as a special case.
- However, pre-2014 retirees were largely excluded because:
- The EPFO imposed difficult and unrealistic eligibility conditions.
- As a result, many pensioners remained ineligible for higher pension benefits.
Features of the New EPS 2026
Removal of the Higher Pension Option
- The option provision for higher pension has been completely removed.
- Authorities consider it “obsolete”, arguing it reflected a narrow legal interpretation.
No Revision of Wage Ceiling
- There is no indication of raising the ₹15,000 PF contribution ceiling.
- Both:
- The ₹15,000 wage ceiling, and
- The ₹1,000 minimum pension
have remained unchanged for over 11 years.
Concerns About EPFO’s Approach
- The EPFO’s approach appears focused on reducing the long-term pension burden.
- Critics argue that the organisation could manage pension obligations if:
- Government funding increases, and
- Employer and voluntary employee contributions rise.
Way Forward
- Pension reforms require greater empathy and a positive policy approach from the Union government and the EPFO.
- Simply changing laws, rules, and procedures will not adequately address the concerns of millions of members and pensioners.
- Sustainable reform must balance financial viability with social security protection.
Conclusion
The approval of EPS 2026 by the Employees’ Provident Fund Organisation highlights concerns about transparency, stakeholder consultation, and pension adequacy. With unchanged wage ceilings and removal of higher pension options, many workers may face reduced retirement security. Sustainable reform requires greater government support, periodic revision of pension limits, and inclusive policymaking to balance fiscal responsibility with stronger social security protection.
Descriptive question:
Q. Critically examine transparency concerns and pension security implications of EPS 2026 approved by the Employees’ Provident Fund Organisation. (150 words, 10 marks)